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balandron [24]
3 years ago
15

Only one commercial bank in the banking system has an excess reserve, and its excess reserve is $400,000. This bank makes a new

loan of $300,000 and keeps an excess reserve of $100,000. If the required reserve ratio for all banks is 12.5 percent, the potential expansion of the money supply from this new loan is
Business
1 answer:
Zarrin [17]3 years ago
5 0

Answer:

money supply will increase by 2,400,000

Explanation:

the expansion f the money supply will be:

the money multiplier will be:

1/reserve ratio = 1/0.125 = 8

300,000 x 8 = 2,400,000

The reasoning for the multiplier effect is the following:

once the money is received, it will be used, and the person who receive the cash will deposit their proceeds.

This amount, can generate a new loan for, the remainder after subtracting the required reserve.

300,000 - 12.5% = 262,500

And this, once used will also end in a deposit. This opens the posibility for another loan, after reducing the reserve

262,500 - 12.5% = 229,687.5‬

This can be reapeat again and again and the limit for this is the formula state above:

multiplier effect = 1/reserve ratio

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Which of the following statements is (are) false?(A) Operations costing accounts for material costs like job costing and convers
Airida [17]

Answer:

C. Both A and B

Explanation:

Operation Costing:

is the acccount of process costing until there is a split-point when the costing systems moves to job system.

This means the materials are calculate with calculate with process costing. And then there is a degree of customization which makes the job costing useful.

(A) FALSE is the other way around. The system use process costing until split point, when it switch to job costing for specific procedures.

(B) FALSE

An automobile manufacturer do the same car over and over.

There is no difference between the car. It will use process costing.

6 0
3 years ago
Which of the following statements is true in the context of selecting the best alternative? a. The decision maker can only selec
Assoli18 [71]

Answer:

d. The decision maker must only stick to completely rational, mathematical analysis while selecting an alternative.

Explanation:

It is most ideal for a decision maker to stick to completely rational way of selecting an alternative as this means that the decision maker will only make choices that will be of maximum benefits and low costs. Factors such as personal feelings, or sense of obligation do not interefere when a decision maker sticks to completely rational and mathematical analysis method of decision making.

7 0
3 years ago
If a firm has a limited capital budget and too many good capital projects to fund them all, it is said to be facing the problem
nexus9112 [7]

Answer:

"Capital rationing" would be the appropriate answer.

Explanation:

  • Capital rationing is a systematic process for allocating remaining cash through various alternative investments, thus growing the bottom line of a financial institution.
  • It consists of calculating profitability economic indicators across all projects as well as choosing the best ventures which result in the highest present value especially when associated.

8 0
2 years ago
You are given the following information concerning Parrothead Enterprises:
Alenkinab [10]

Answer:

7.85%

Explanation:

Face value of bond =$2000

Price of current bond= face value× 106.5% = $2130

Term= 25 years×2= 50 period

Coupon rate= 7%×1/2= 3.5%

Coupon amount= coupon rate×face value = $2000×3.5/100

         =$70 for a period

YTM of bond= [coupon amount+ (maturity value-current price)/Term]/0.6×current price+0.4×maturity value]

YTM of bond= 6.487% per annum

Total market value of bond= 8,400bonds× $2130= $17,892,000

Market value of common stock= 275,000shares × 62.50= $18012500

Weight of common stock= 0.490009385

Weight of preferred stock= 0.023259294

WACC= Wd* Kd + Wc*Kc + Wp*Kp

= 0.486731321× 4.86525% +

0.490009385× 10.9624275+

0.023259294× 4.7368421%

=7.849%

= 7.85%(rounded)

Thus, WACC is 7.85%

3 0
3 years ago
When __________ funds are set aside (idling the excess) and government does not spend the money nor apply it to past debt, this
finlep [7]
When surplus <span>funds are set aside (idling the excess) and the government does not spend the money nor apply it to past debt, this action does not cause expansion or contraction.
That statement is true. Expansion or contraction happens when the amount of Government budget is accumulated or decreased as the result of last year's operations</span>
7 0
3 years ago
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